PACRA assigns Initial Rating to PMRC - PP Sukuk

Pakistan Mortgage Refinance Company – PMRC, commenced business in 2018 as Pakistan's first mortgage refinance institution to provide lending to both; Islamic and Conventional Financial Institutions. The purpose of the institution is to increase the availability of affordable mortgages, consequently reducing the shortage of housing in Pakistan. The regulatory structure is supportive to the initiative. The rating incorporate the robust shareholding of Ministry of Finance, National Bank of Pakistan, Habib Bank, United Bank, International Finance Corporation, Allied Bank, Bank AL Habib, Bank Al Falah and Askari Bank in PMRC. Initial financing has been under World Bank’s Housing Project, on-lent by the Government of Pakistan. The Company’s primary source of finance will emanate from the bond/sukuk issue, hence targeting the development of bond/sukuk market in Pakistan. Over the years, PMRC’s financing portfolio increased manifolds. Investment book comprising of government securities, increased further. The business risk profile is strong evidenced by healthy asset yield and lower cost of funds. During CY20, Company’s net markup income grew significantly when compared with the same period last year. PMRC’s financial risk profile is also considered favorable where equity base has witnessed organic growth as International Finance Corporation (IFC) subscribed to PMRC's ~12% capital in Jan-2021. PMRC is planning series of bonds/sukuk, in upcoming years, which will provide with ample liquidity in years to come for further development of mortgage housing finance industry in the country.
PMRC has issued Privately Placed Sukuks as instrument of redeemable capital of amount PKR 3.1bln. The proceeds of the Issue will be utilized to refinance the residential mortgages/housing portfolio of eligible financial institutions. Security is based on hypothecation charge over specific receivables of PMRC with 25% margin (primary security) and lien over Term Deposit of PKR 1,600mln held with a high-rated bank.

About the Entity
PMRC commenced business in 2018. It was established as Pakistan's first mortgage refinance institution to provide financing to both; Islamic and Conventional Financial Institutions. Major controlling interest rests with Ministry of Finance, Pakistan, at approximately 29%; the remaining 71% is owned by a pool of 10 private and public sector financial institutions. The board of directors comprises ten members, which includes seven non-executive directors; one executive director and two independent directors. Six major financial institutional shareholders are represented on the board encompassing NBP, HBL, UBL, Askari, Alfalah and ABL. While one member represents Ministry of Finance.

About the Instrument
Pakistan Mortgage Refinance Company Limited (PMRC) has issued Privately Placed Sukuks as instrument of redeemable capital under Section 66 of the Companies Act, 2017 and Private Placement of Securities Rules, 2017. Issue amount is PKR 3,100mln. Profit (8.25% per annum) is payable semiannually on the principal amount. The first such profit payment of PKR 129mln is falling due on Sep 18, 2021 and subsequently every six (06) months thereafter. The proceeds of the Issue will be utilized to refinance the residential mortgages/housing portfolio of an eligible financial institutions. Principal amount will be redeemed in bullet at maturity. Security is based on hypothecation charge over specific receivables of PMRC with 25% margin (primary security) and lien over Term Deposit held with a high-rated bank.